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How would you like to be hundreds of thousands or millions out of pocket?
Over a period of 30 years, that is the figure you can expect to lose if you rent a home instead of buying or building one.
Forget the myth that it’s cheaper to rent. In many reports it has been proven that in the long term, the real cost of renting puts you behind financially.
With many years experience in the home building industry, Geoff is well qualified to comment on the cost of renting compared to the cost of buying. Geoff said: “Obviously, people will argue that as the Managing Director of a home building company I am biased. So, to overcome that let’s just deal with the facts.”
Let’s talk about a hypothetical case. We will call the couple Roger and Susan. They have been married for 30 odd years and are now in their 50s. When they first married, Susan was 21 years old. At the time their weekly rent was $385. If we adjust the figures so that the rent they were paying is expressed in today’s money then we get the following result:
At 21 they paid $385 / week in rent,
At 31 they were paying $830 a week,
At 41 they were paying $1793 a week, and
At 51 they were paying $3870.
“When you talk in those terms, some people are puzzled and say ‘we’re not
paying $4,000 a week in rent’ and they’re right. That’s not what their paying on the face of it but if you calculate what the dollar was worth 30 years ago and express it in today’s terms then that is what they are paying,” Geoff said.
“Look at it another way. When the Holden Commodore first rolled off the production lines in the summer of 1978 it cost $6,513. Thirty years later, a new VE Commodore would have cost a motorist $32,990. The price hasn’t gone up because Holden has put a lot of new things into the basic model. It’s gone up because of inflation.”
Geoff then explained that the rent paid by Roger and Susan over the 30-year period totalled no less than 2.3 million dollars. He said this was calculated on the basis of recorded property data for the past 50 years and took into account rent increases of 8 per cent a year. “It’s a lot of money to have paid, especially when you remember they are probably paying someone else’s mortgage.”
If Roger and Susan had been informed at the outset they could have put that money into paying off their own mortgage and had a lot left over.
There are loads of online calculators available for you to crunch the numbers and see what you will lose if you choose to rent.
Don’t just take our word for it.
Adrian Barclay, a journalist for Finder.com.au, has compared the two scenarios and published his findings on RealEstate.com.au. His conclusion was: “Over the long run the numbers lean towards buying a home in favour of renting.”
If you are interested in talking about building a home or would like more information about the real cost of renting, contact Grady Homes.